Ramaphosa’s plan to tackle South Africa’s ‘big four’

South African President Cyril Ramaphosa has announced plans to tackle four issues that are essential to reach an ambitious 3% GDP growth figure for 2025.

In his State of the Nation Address (SONA), Ramaphosa focused on key economic and governance reforms.

The Bureau for Economic Research (BER) said that the Medium-Term Development Plan aims to boost economic growth to over 3% via large-scale infrastructure investment.

The 3% figure was estimated by the BER for the Government Business Partnership and is based on South Africa achieving major reforms in four key areas:

• Electricity shortages;
• Logistics challenges;
• Water constraints; and
• Governance failures.

In his speech, Ramaphosa noted that the government plans to invest billions in infrastructure in the coming years.

The government plans to spend R940 billion over the next three years on roads, bridges, dams and waterways.

Water infrastructure is also set to receive R23 billion for seven major projects.

The BER was also encouraged by the details from the speech that mention the review of the funding model for municipalities to improve service delivery.

The President said that many municipalities lack the technical skills and resources required to meet the needs of people.

Many municipalities have also not reinvested the revenue they earn from services into the upkeep of infrastructure. 

This means that many cities and towns have roads that are not maintained, water and electricity supply is often disrupted, refuse is not collected and sewage runs in the streets.

Failures at municipalities have severely impacted economic growth amid poor financial governance practices, which can be seen in Eskom being owed over R100 billion from municipalities.

The President’s speech also mentioned talk of leveraging private capital for railways and logistics amidst Transnet’s extreme struggles.

With load shedding rearing its ugly head last week for the first time in over 300 days, the President said that the Electricity Regulation Amendment Act, which came into effect on the 1st of January, marks the beginning of a new era. 

The President said that the country will put in place the building blocks of a competitive electricity market this year.

This will allow multiple electricity generation entities to emerge and compete.

“We will mobilise private sector investment in our transmission network to connect more renewable energy to the grid,” said the President.

“As we reform our energy system, we are continuing to build successful multilateral partnerships in the global effort to halt the devastating impact of climate change.”

Although the President has committed to meet the 3% target, most economists, including the BER, expect growth of between 1.5% and 2.2% for 2025.

Grant and NHI updates

On top of the economic growth issues, the President also reaffirmed the commitment to turn the Social Relief Distress (SRD) grant as the basis for the introduction of a grant to support unemployed people.

This is not the first time that the President said that the “temporary” SRD grant would be turned into a permanent form of support for the unemployed, expressing similar sentiment in the 2024 SONA.

The President also reaffirmed the commitment to the National Health Insurance (NHI) despite opposition, arguing that it would reduce healthcare inequality.

“It should be noted that in his speech, the President referred to preparatory work for the NHI and not its imminent implementation,” said the BER.

“Considering this, it is unlikely that Treasury will make room for the NHI in its February budget.”